Modern Investor Pulse — Q1/2023

Retail Investors Unfazed by Uncertainty

January 2023

A man speaking into a microphone to a seated crowd.
2022 was tough, that’s for sure: global inflation and rising interest rates wreaked havoc, the S&P 500 plunged into bear territory, and the crypto market looked positively apocalyptic. But shockingly, the hearty retail investor community has emerged optimistic. That matters: retail investors are set to account for 61% of all global assets under management (AUM) by 2030.
The Finimize community used our quarterly Modern Investor Survey to tell us how they’re feeling, behaving, and investing in this economic backdrop. Over 2,300 of our one-million-strong global retail investor community chimed in.

Here's the preview:

80%

believe the worst will be over by mid-2023.

72%

will back individual stocks, and many are standing by Big Tech (64%) even after mass layoffs.

1%

plan to sell off their investments,  more than half (65%) plan to keep investing, and almost a third (29%) plan to invest more despite the cost of living crisis.

37%

plan to invest surplus income in crypto following the FTX scandal.

85%

have never invested in a meme stock.

Meet the modern retail investor.

Retail investors are often characterized as meme stock fanatics who exclusively hang out on Reddit’s wall street bets forum. But that’s far from the truth: they’re smart, curious, and action-orientated global young professionals who make disposable income every month, and they know they should be doing something smart with that cash. 30% of Finimizers have been investing for more than years, while a substantial 8% only started this year. Either way, they use their communities and social networks to add to their knowledge on the go.

How long have you been investing?

10+ Years

1-2 Years

3-4 Years

5-10 Years

I started this year

I don't invest

Other

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Finimizers think the worst will be over soon.

Finimizers expect the market to bottom in the next six months, and 6% expect that low to last more than a year. Only 1% plan to sell off their investments, while 65% aim to keep investing – 20%, meanwhile, are building up cash and waiting to see what happens next. And despite numerous financial concerns (not least the cost of living crisis), nearly a third of respondents (29%) said they plan to invest more in 2023.

Max Rothery, VP of Community, Finimize
Retail investor's 'buy the dip mentality' has served them well in their recent experience with the pandemic and prior to that the 2008 crisis. So it's no surprise they expect markets to rebound. We'll be monitoring our community closely to see how their investing behaviours change if there is a prolonged recession. As it stands, they are thinking long term and believe the stock market will deliver returns".

When are you expecting the bottom of the market to be for stocks?

6 Months

3 Months

Now

1 Year

Has already passed

More than a year away

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Big Tech and crypto still have (a lot of) fans.

The majority of Finimizers (72%) plan to invest their extra income into stocks over the next six to 12 months, with 64% favoring Big Tech despite the sector’s workforce haemorrhages. Recent data suggests that retail investors bought the Big Tech dip, likely seeing the opportunity as a chance to snap up profitable firms for less.

They’re a brave bunch, Finimizers: 37% said they still plan to invest in digital assets after the FTX crash, and 56% believe the price of bitcoin will be higher in 12 months. There could be more where that came from, too: over half (57%) said they’d be more inclined to invest in crypto if it was more heavily regulated.

Jonathan Hobbs, Finimize Analyst (Crypto)
Crypto dipped more than everything else last year, which isn’t surprising given it’s a lot more volatile than your average stock index. And it wasn’t just the macro: the market was leveraged to the hilt, which caused a lot of forced selling from big investors on the way down – driving prices lower still. But with inflation now cooling and most of that leverage washed out of the system, today’s lower prices could provide great opportunities for patient investors who do their homework

How do you feel about the crypto space following the fall of FTX?

Unsure, watching closely to see how it unfolds

I've never invested in crypto so this doesn't concern me

Optimistic, this is just a blip

I don't think I'll be investing in crypto again after this

I don't know

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Finimizers are going all alternative.

Many Finimize community members have started exploring alternative asset classes, mainly in a bid to diversify their portfolios and snap up buzzy opportunities. Over a third (38%) see alternative assets as a fresh way to find returns, and almost half (47%) are planning to invest in alternatives next year.

Why this trend?

theodora lee joseph, finimize analyst (Ex-goldman sachs)
This increasing preference towards alternative assets isn’t surprising. Assets like private equity, real estate, wine, art, and even collectables typically have a low correlation to traditional asset classes like stocks or bonds, or even the economy. This means returns tend to hold up even when global growth is weak, plus alternative assets can help reduce volatility in a portfolio too. Fintech platforms and listed trusts that provide retail investors access to fast-growing private companies have also made the once unattainable class of private equity now more accessible.

Do you intend to invest in alternative assets in the next 6-12 months?

Yes

No

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Retail investors have a long reading list.

Social media might be one of the easiest ways to gather information quickly, but investors have their wits about them. The World Economic Forum estimates that 53% of retail investors use social media during their investing process, but our survey shows that less than a quarter (23%) of retail investors truly trust social media platforms when making their investment decisions. So while it ranks highly as a source of information flow, investors tend to supplement those learnings with data from other sources. 68% prefer to check out financial media, even over banks, brokerages, or financial firms.

Retail investors are painted as easy targets for overly gamified trading platforms too, but it turns out they’re more than savvy about them. So while more transparency around the brokerage revenue model would help, modern investors say they’re wary of content released by brokers.

What source of information do you trust when making investment decisions?

Financial Media

Finimize

Financial Firms

Investment Brokerages

Social Media

Other

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Eddie Donmez,  Analyst and Lead Content Creator, Finimize
Building a loyal following on social media is essential for any brand trying to communicate with the modern investor. Social media is a key part of the retail investor's research process, so finance brands have a huge opportunity to cut through the noise and provide useful and entertaining content with little expectation in return. Brands that take a patient and generous approach to connecting with their audience will be able to build trust at scale.

What does this mean for brands?

Here to stay

Retail investors are a growing force in capital markets. They are shifting their behaviors toward building wealth over time and becoming more sophisticated in their investing approach. They are displaying confidence in their skills, diversifying investments, and looking to explore new asset classes. By developing a better understanding of their motivations and needs, brands can uncover growth opportunities.

Education as an enabler

According to research from The World Economic Forum, 74% of retail investors would invest more if they had additional opportunities to learn about investing. Modern investors learn by doing, and seek advice and information from their communities. Being time-poor, retail investors need an education that serves their needs – always on, multi-channel, bite-sized, and easy to digest. Better-informed retail investors make better portfolio decisions, which lead to using more investment products and services.

Trust as a conduit for action

Trust in the financial system and investing platforms is cited as one of the most common obstacles that hold people back from investing. In times of uncertainty, consumers turn to brands they trust. Helping retail investors navigate the markets will reward brands with a loyal customer base. This means meeting investors where they are and having conversations they want to have. Help retail investors discover your brand at the right time and empower them to take action by offering high-quality educational content that they value.

About the survey

The Finimize Modern Retail Investors survey is run every quarter. You can access Q4/2022 results here.
Data for Q1/2023 collected Nov, 2022 and analysed Dec, 2022; raw data available here.
Number of the respondents: 2,300+